Province Gives City Council January 24, 2018 Deadline to Decide on LRT Operations

Rendering of Hamilton's Proposed LRT looking west at the intersection of King Street East and Wellington Street.

In a letter released late Monday afternoon, President & Chief Executive Officer of Metrolinx Phil Verster has delivered a January 24, 2018 deadline for Hamilton City Council to make a final decision on the B-Line Light Rail Project.

The letter responds to a August 18, 2017 resolution by Hamilton City Council demanding the province give them control of the operations of the LRT and that the Hamilton Street Railway operate the line.

The province’s long-awaited response is that the HSR can operate the line, if the City assumes the liabilities, costs, and increased construction costs resulting from the change.

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Verster states the province does not believe HSR operating the project is in the best interests of the LRT nor City Council.

Council Must Decide Quickly if They’ll Run the LRT

With the January 24 deadline looming, Council must decide quickly if they wish to fund the cost of HSR operating the LRT.

If Council votes to operate the LRT, the City’s LRT Director Paul Johnson, in a report to Council, says he’ll “immediately” need to hire “a team of one to three rail experts would be needed to clearly define the role of the operator in all tender documents, particularly the Project Specific Output Specifications (PSOS). This team could consist of full-time staff, but would more likely, given time constraints and availability of resources, consist of consultants”.

No budget estimate is provided for these consultants.

Johnson says his office will require an additional team “of approximately five people” during the design and build phases of the project to “ensure that the interests of the City as operator were protected”. He estimates this will cost $750,000.

Johnson further states that voting to have HSR operate the LRT exposes the City to cost implications for delays. “There is a risk that these interfaces could cause delays for which the City would be responsible. Any such delays attributed to the City could also have cost implications.”

The report continues with further risks to the City:

“Claims related to the City’s role as operator include not only foreseeable claims, such as those associated with accidents and/or the City’s role in the design development and delivery phases of the project, but also unforeseeable claims.”

If the City chooses to operate the LRT, operators would be part of the same union, ATU 107, as HSR bus operators.

Council Meeting Called for Friday

City Council will hold a special (emergency) Council GIC meeting on Friday morning to debate their response to the letter. At the time of publication of this article, there were two public delegations registered to speak, both from the NO LRT movement: Carol Lazich, and Sarah Warry Poljanski.

Members of the public can register to speak to Council on the new LRT development, and if the HSR should operate the LRT prior to 12 noon on Thursday using the City’s online delegation request form.

Full Text of Letter from Province to Hamilton City Council on HSR Operating LRT

I am pleased to respond on behalf of the Province and Metrolinx to Hamilton City Council’s August 18, 2017 motion regarding Hamilton Street Railway (HSR) operating and maintaining the Hamilton Light Rail Transit (LRT) system.

The March 2016 Memorandum of Agreement (MOA), between Metrolinx and the City confirmed key principles, roles and responsibilities for the Hamilton LRT project, which is expected to be completed by 2024. The MOA identified Alternative Financing and Procurement (AFP) using Design-Build-Finance-Operate-Maintain (DBFOM) as the anticipated delivery model for the project. The DBFOM model means the successful consortium (ProjectCo) responsible for designing and building the project, is also responsible for operating and maintaining it for the 30 year concession period.

This approach ensures that ProjectCo considers all aspects of performance including that of operations and maintenance assets, and in so doing, it provides a strong incentive for high quality design, high quality construction, and also for cost effective and efficient long term performance.

Metrolinx and the Province have devoted significant time and effort to consider and assess the implications of changing the delivery model at this stage of the project, while ensuring value for money, appropriate risk transfer and committed project timelines are maintained. I believe that removing operations from the procurement and assigning them to the HSR is not in the City’s interest for the following reasons:

It increases the project’s complexity and creates interface risks between ProjectCo and HSR, which will imply a commercial risk to HSR. Should such interface risks not be resolved during the delivery of the contract, the implementation of services will be affected and HSR will incur costs and liabilities for such delays;

It can result in higher operating cost due to the lack of competitive tension compared with the DBFOM model where bidders provide a long term fixed price for operations;

It can result in delays in the procurement of approximately 4 to 5 months as it requires a new Request for Qualifications to ensure an open and fair procurement process.

Based upon these considerations, I strongly recommend that the project continue to be delivered using the DBFOM model. However, if the City decides it is not willing to proceed with this model, Metrolinx is prepared to remove operations from the current procurement and work with the City on the basis that HSR will take on both the commercial and operational obligations under contract with Metrolinx remaining as the project owner.

To be specific, ProjectCo will retain the responsibilities for daily and lifecycle maintenance as well as for capital rehabilitation of the assets. This is consistent with the Design-Build-Finance-Maintain (DBFM) LRT projects in Toronto and Ottawa.

The City will be fully responsible and accountable to Metrolinx to operate the LRT system with the following obligations:

Provide full support and assistance to Metrolinx and Project Co. during design development and delivery phases as required where it pertains to Operations.

All commercial claims related to HSR’s responsibilities as the provider of operations under the contract.

The City will also be responsible for and carry the complete and full risk for ensuring that HSR is capable of fulfilling the above accountabilities and has comprehensive plans to achieve that state of readiness. Such plans must be shared with Metrolinx by no later than March 2020, given that it typically takes 4 to 5 years to properly prepare the operational capabilities. The City will also have to enter into an operations agreement with Metrolinx, by March 2020, to define the roles and responsibilities of the parties, the service and performance standards, the commercial responsibilities as well as the interface requirements between HSR, Metrolinx and ProjectCo.

This approach is consistent with the Toronto and Ottawa LRT projects – where the local transit agency will operate the LRT services.

Until the City formally agrees to all the provisions in this letter, Metrolinx will continue to proceed on the assumption that the project will be delivered through a DBFOM model with ProjectCo delivering the operations. If the City wants to change to a DBFM model with HSR delivering the operations, I would ask that the City formally confirm agreement to all the conditions in this letter, supported by a Council resolution, by January 24, 2018.

I appreciate the patience shown by the City and trust this response demonstrates the commitment of the Province and Metrolinx to the LRT project and our willingness to consider the City’s requirements.

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